2013 ORS § 316.082¹

Credit for taxes paid another state

• rules

(1) A resident individual shall be allowed a credit against the tax otherwise due under this chapter for the amount of any income tax imposed on the individual, or on an Oregon S corporation or Oregon partnership of which the individual is a member (to the extent of the individuals pro rata share of the S corporation or distributive share of the partnership), for the tax year by another state on income derived from sources therein and that is also subject to tax under this chapter.

(2) The credit provided under this section shall not exceed the proportion of the tax otherwise due under this chapter that the amount of the modified adjusted gross income of the taxpayer derived from sources in the other state bears to the entire modified adjusted gross income of the taxpayer.

(3) The Department of Revenue shall provide by rule the procedure for obtaining credit provided by this section and the proof required. The requirement of proof may be waived partially, conditionally or absolutely, as provided under ORS 315.063 (Waiver of substantiation by Department of Revenue).

(4) No credit allowed under this section or ORS 316.292 (Credit for taxes paid another state) shall be applied in calculating tax due under this chapter if the tax upon which the credit is based has been claimed as a deduction, unless the tax upon which the credit is based is restored to income on the Oregon return.

(5) Credit shall not be allowed under this section for income taxes paid to a state that allows a nonresident a credit against the income taxes imposed by that state for taxes paid or payable to the state of residence. It is the purpose of this subsection to avoid duplicative taxation through use of a nonresident, rather than a resident, credit for taxes paid or payable to another state.

(6) The Department of Revenue may adopt rules under this section that provide a credit against the tax imposed by this chapter when the department considers the credit necessary to avoid taxation of the same income by this state and another state.

(7) As used in this section:

(a) Modified adjusted gross income means federal adjusted gross income as modified by this chapter and the other laws of this state applicable to personal income taxation.

(b) Oregon partnership means an entity that is treated as a partnership for Oregon excise and income tax purposes.

(c) Oregon S corporation means a corporation that has elected S corporation status for Oregon excise and income tax purposes.

(d) State means a state, district, territory or possession of the United States.

(8) For purposes of this section:

(a) A direct tax imposed upon income of an Oregon S corporation is an income tax imposed on the Oregon S corporation.

(b) An excise tax that is measured by income of an Oregon S corporation is an income tax imposed on the Oregon S corporation.

(c) An excise tax is measured by income only if the statute imposing the excise tax provides that the base for the excise tax:

(A) Includes revenue from sales and from services rendered, and income from investments; and

Notes of Decisions

Washington business and occupa­tion tax is tax levied on business ac­tivity and does not qualify for credit allowed for income based taxes paid to other states. Keller v. Dept. of Rev., 12 OTR 381 (1993), affd 319 Or 73, 872 P2d 414 (1994)

Member entitled to pro rata share of credit includes any per­son who must report S corpora­tion income and deduc­tions, whether or not per­son is shareholder. Bishop v. Depart­ment of Revenue, 14 OTR 10 (1996)

Taxpayer paying taxes to more than one other state must apply statutory credit limita­tion separately to tax paid to each other state rather than applying limit to aggregate taxes paid to all other states. Schuette v. Dept. of Revenue, 14 OTR 164 (1997), affd 326 Or 213, 951 P2d 690 (1997)

Chapter 316

Notes of Decisions

The goal of this chapter is to incorporate all of the pro­vi­sions of the federal Internal Revenue Code; taxable income should be adjusted whenever the result of the adjust­ment is to give effect to the policies or principles of the federal Internal Revenue Code, even though no express authority for the adjust­ment is present in the statutes. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974); Smith v. Dept. of Rev., 270 Or 456, 528 P2d 73 (1974)

By its enact­ment of this chapter, the legislature intended to adopt §172 of the federal Internal Revenue Code allowing for the carryback and carryforward of net operating losses. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974)

Where plaintiff failed to ap­peal timely as re­quired by this sec­tion, ap­peal rights were not preserved so that cause could be considered on merits. Dela Rosa v. Dept. of Rev., 11 OTR 201 (1989), affd 313 Or 284, 832 P2d 1228 (1992)

Where taxpayers paid foreign income taxes on foreign income and claimed foreign taxes paid as federal tax credit and as state business expense deduc­tion, taxpayers who claim federal foreign tax credit are entitled only to foreign tax deduc­tion provided in ORS 316.690 (Foreign income taxes). Whipple v. Dept. of Rev., 309 Or 422, 788 P2d 994 (1990)

For purposes of claim preclusion, all issues re­gard­ing taxpayers income tax liability for tax year constitute same claim. U.S. Bancorp v. Dept. of Revenue, 15 OTR 13 (1999)

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